Mobile at Forefront
Retailers can expect mobile devices to impact sales and play a greater role in buying decisions this holiday than last. Mobile as a percentage of site traffic on Black Friday shot up to 24% in 2012 from 14.3% the previous year. Sales over smartphones and devices on Black Friday rose to 16% in 2012, up from 9.8% in 2011.
Given mobile’s increasing momentum heading into the holiday, the pressure will be on for retailers to deliver a superior mobile experience. Indeed, retailers are investing in a multitude of site features and services, marketing programs, mobile initiatives and more to maximize holiday results, according to a survey by shop.org, a division of the National Retail Federation.
The "Pre-Holiday Retailer Survey" conducted with Prosper Insights & Analytics, showed that mobile is weaving its way into all aspects of digital retail. More than half of retailers surveyed said that a mobile-optimized website is one of their most important investments this year.
The survey found that search and email are key ingredients for holiday marketing. Close to half (46%) of retailers are investing in Google Product Listing Ads for this holiday, while another third (38%) want to deliver personalized emails to their customers.
In other findings, free shipping will be alive and well again this holiday. In late 2012, Google found that nearly half of all shoppers will leave a site if it does not offer free shipping. Retailers aren’t taking any chances. More than one-third (38%) of retailers surveyed are analyzing and investing in free shipping offers that include a minimum purchase threshold.
With mobile a top-of-mind priority, here are some recommendations from IBM’s "Sixth Annual Online Retail Holiday Readinesss Report" on how retailers can maximize their mobile marketing efforts:
• Mobile email: Marketing emails can render attractively on one device, and messily on another. Use an email rendering tool to preview how mobile email displays across different devices, browsers and email clients.
• SMS text messaging: With high open and response rates, text messaging is a great way to get your message in front of on-the-go consumers. The range of potential communications is broad, from one-way broadcast messages to two-way interactions with coupons, text-to-win promotions and more. Securing opt-in is essential, and is best achieved by promotions through conventional email, website and display ad channels.
• Location-based targeting: This type of targeting enables brick-and-mortar retailers and others to reach consumers via SMS text messaging and other means with immediacy and geographic precision.
• Digital ads and recommendations: Mobile devices offer a way to retarget shoppers after they’ve left your site with either brand or product-specific ads that link to a mobile-optimized landing page. Analytics can tell retailers what sort of content most interests mobile users, allowing for customized communications.
For many consumers, preparing for the holidays is a mixture of joy and stress. While the promise of family, gifts and a bountiful meal hangs in the distance, a lot of toil and trouble is needed to reach that end goal. It’s no different for retailers. Sales during the holiday season can represent 20% to 40% of a retailer’s total annual sales, according to NRF estimates, and a successful holiday can turn around a bad year or make a good year even better. But reaching those sales totals requires a lot of effort in connecting with customers across all channels in order to get them the products they want, when they want them, as conveniently as possible, despite the chaos of the holiday rush.
This special section of Chain Store Age highlights a number of ways retailers are using IT to help make their holiday wishes come true. We examine how off-price department store Stein Mart is overhauling its merchandising and e-commerce systems in ways that better ensure holiday success, review some solutions that can help retailers meet the holiday needs of customers through social media networks, and offer tips for mobile marketing. And with assistance from Forrester analyst Denee Carrington, we investigate how digital gift cards can make holiday shopping easier for customers and more profitable for retailers.
Stein Mart Get SMART for the Holidays
When it launched a wide-ranging IT transformation initiative called Stein Mart Advanced Retail Technology, or SMART, four years ago, 262-store off-price department store retailer Stein Mart was thinking far more broadly than trying to better meet holiday demand. But the retailer has reaped significant holiday-related benefits as a result of the program, which has upgraded merchandising, returns management and POS systems and also laid the foundation for its new e-commerce offering.
"Our legacy merchandising system was very old," said Andrew Black, CIO of Stein Mart. "It was becoming unreliable and posed a risk to the business. And there were a lot of capabilities it didn’t have, such as the ability to fully communicate with our supply chain network."
So Stein Mart issued what Black termed an "elaborate" RFP that included factors such as functionality, strategic vendor support and continued investment in the platform. The company ultimately selected the Oracle merchandising platform as the core of the SMART program, which also led to upgrading the retailer’s POS solution from Oracle POS version 6 to version 13 and a complete upgrade of all store POS registers, servers, switches, routers, scanners, copiers and printers with hardware from IBM, Xerox, Cisco and HP, as well as the rollout of a managed multiprotocol label switching (MPLS) network from L3.
"We replaced everything except the vending machines and drinking fountains," joked Black.
As part of SMART, Stein Mart also rolled out an Oracle Central Office Database and POS version 13-compliant RMS returns management solution. These changes have all helped Stein Mart do a better job in effectively managing a wide variety of holiday-related issues.
For example, the system upgrades have led to better system availability, especially critical as workloads get heavier during the holiday season. And combined, the centralized database and enhanced returns management capabilities allowed Stein Mart to implement an improved set of business rules to help detect fraudulent returns without frustrating legitimate customers returning gifts.
"Everyone thinks the holiday season ends Dec. 25," said Black. "It actually runs into early January. We profile customer behavior to differentiate between fraudulent and legitimate returns."
The newest piece of Stein Mart’s IT transformation puzzle is an integrated e-commerce site the retailer just launched at the end of August, timed to be fully operational for the 2013 holiday season.
"We’re the first off-price retailer with an e-commerce presence," commented Black. "We offer a significant online assortment with the majority of our store’s merchandise categories represented."
Using a turnkey e-commerce fulfillment system and technology stack from eBay Enterprise (formerly GSI Commerce), Stein Mart will initially offer an integrated site for PC users that allows goods to be shipped to their home and returned to a local store. Black said the retailer is considering expanding its e-commerce functionality in the future to allow activities like shipping items purchased online to the store and mobile shopping. He also said Stein Mart, which currently has a robust Facebook promotional/customer engagement presence, may move toward social commerce in the future as well.
Whatever Stein Mart decides to do in terms of IT transformation, or anything else, the retailer always focuses on serving a customer base it prides itself on staying in close touch with.
"We communicate with our customers," Black stated. "We know our customers pretty well."
Pep Boys Courts Wider Audience
Small beginnings can lead to big things. That’s certainly true in the case of Pep Boys, which was founded in 1921 by four Navy buddies who pooled together $800 to open an auto parts store in Philadelphia. Today, with some 750 stores across the United States and Puerto Rico, the Philadelphia-based company is one of the nation’s leading auto supply and service providers. Balancing its rich history and changing customer demographics, Pep Boys is pursuing a more focused customer-centered strategy — one that includes an emphasis on service — to stand out from the competition.
Chain Store Age editor Marianne Wilson spoke with Pep Boys’ senior VP and chief customer officer Tom Carey about the company’s changing customer base and new updated customer experience. Carey, who joined Pep Boys in August 2012, previously served as senior VP and CMO for Orchard Supply Hardware.
Your position is new. What does the job entail?
The position was created by Mike Odell (CEO and president of Pep Boys). Mike recognized that to truly drive a customer-centric philosophy across the entire company, he needed to create a senior position that was exclusively dedicated to doing so.
The job, at its core, is about crafting the strategy of how we change our “go to market position.” Since the company had decided to take a customer-centric approach to getting there, this position had to determine which customers we wanted to target, and develop a comprehensive understanding of their life — not just their cars. Then we had to push that understanding into all aspects of strategy and execution, including store design, customer service, product, marketing and the like.
Has Pep Boys’ customer base changed in recent years?
Our customer makeup has changed. As we grow the service side of our business, we are seeing a much more balanced male and female customer base.
In our DIY business, we still see a predominantly male audience. But while that side of the business still accounts for most of our transactions, it does not represent the majority of our revenue due to the average sale on the service side being so much larger.
How important are maintenance and repairs to Pep Boys’ strategy going forward?
We see the service market as our biggest growth opportunity. It is a much larger market than the DIY market in terms of expenditures, where it is four times as bigger, and also has a bigger potential customer base. It’s also the fastest growing market of the two, as DIYers shift to “do it for me” customers and as cars get more complicated. Summing it up, the service arena is a market where we feel there is ample opportunity for a player to get it right and distinguish themselves with consumers.
Let’s talk about Pep Boys’ new store concept in Tampa (see page 62). What was the thinking behind it?
It was our effort to take all our customer thinking, learning and strategies and put them into a real market. We referred to it as a learning market and store because we want to see how our brand re-positioning would work. It’s important to point out that while the physical look and feel of the store changed considerably, this wasn’t just a store remodel. It is a complete brand remodel in that every aspect of how we go to market was turned on its head and re-imagined.
How does the Tampa store differ from Pep Boys’ existing store format?
Both the exterior and interior were completely changed. For the exterior, the architecture was completely redesigned to increase our curb appeal and make it welcoming to our target audience. It was also designed to be uniquely Pep Boys from a brand presence.
Some key elements are the distinctive color schemes, the use of stone and wood accents, and most of all, the soaring red monolith with the newly redesigned Pep Boys logo.
The interior was equally rethought. We set up customer neighborhoods with products that shoppers were most interested in. The customer service area was completely overhauled to create a rich, welcoming and warm environment. And the entire layout and signage hierarchy were changed to make it easier and more interesting to shop, navigate and explore the store.
Is the brand’s history reflected in the new store design?
Very much so, especially in the interior. The company’s rich history and authenticity is reflected in various graphical elements. A notable is the huge monotone picture of a Pep Boys 1930 Vintage Art deco storefront, which owns the wall behind our customer service area. Also, there are various framed pictures of the company’s 90-year-plus history throughout the customer lounge area.
How is the Tampa store doing sales-wise?
It is exceeding expectations. Our prototype remodel requires a 13% comparable-store sales lift in year one to produce a 15% after-tax internal rate of return. The results to date are a lift in comparable-store sales that is more than double that.
Pep Boys is converting six existing locations in the Tampa area to the new concept. Are more in the works?
Yes. Our plan based on the success we have seen with this one store is
to now roll out the changes to our entire store group in Tampa, as well as our new stores across the country.
What are the expansion plans for this year?
For 2013, we have stated that our plan is to open about 30-plus new stores.
How would you describe Pep Boys’ competitive positioning?
We saw from our customer research that there was a huge opportunity gap in our industry. On one end, the consumer sees the dealers as delivering good service and engagement but at a high price. On the other end of this continuum, consumers see most aftermarket providers as deal-oriented and not delivering a particularly great customer experience.
Our new positioning is based on giving customers the same type of experience they get from a dealer model, but with a better value price tag.
Our new format in the Tampa area gives customers the best of both worlds. And based on preliminary feedback, they really like what they have seen and experienced at the store.
How is technology impacting the company?
Technology is impacting us across the board, from the digital space and marketing plan to the way we diagnose car issues and enhance the customer experience in the store. All are moving at an incredible pace.
The challenge we have is the same as other companies: deciding which of the many tech opportunities will best be used and appreciated ultimately in the engagement with our target customer. No one can afford to do tech just for tech’s sake. One area we have truly embraced this is in our industry leading online, E-serve program, which gives customers the easiest and best way to go online to set up service appointments for their vehicles in real time.
“As we grow the service side of our business, we are seeing a much more balanced male and female customer base.”